Customs, Excise and Gold Tribunal - Delhi
Cce vs Ispat Alloys Ltd. (Balasore Alloys ... on 19 July, 2006
ORDER
R.K. Abichandani, J. (President)
1. This appeal has been directed against the order of the Collector of Central Excise (Appeals), Calcutta, made on 19.10.1992, setting aside the Order-in-Original made by the Assistant Collector on 29.06.1990 rejecting the refund claim of Rs. 8,12,494.98 on the ground that the fabricated structural items were clearly identifiable as excisable goods and classifiable under Heading 7308.90 attracting duty @ 15% Basic and Special Excise Duty @ 5% of Basic Duty, which was, according to the Assistant Collector, paid correctly as per the approved Classification List. The Collector (Appeals) came to a finding that, the resultant products, like Trusses & Purlins by cutting, jointing, welding etc., and iron & steel items in the course of construction and erection of factory shed, did not amount to manufacture. The Collector (Appeals) relied upon the ratio of the decision in Pratap Rolling Industries Ltd. v. Collector of Central Excise , in which the decision in Aruna industries v. Collector of Central Excise reported in 1990 (25) ELT 580 (T), was relied on for holding that, the supply of steel to contractor for fabrication and erection of shed within the factory brings into existence an immovable property which is neither 'goods' nor 'products' and, therefore, not excisable. It was held that, the judgments which were applicable to the steel structures under erstwhile Tariff Item 68 were applicable to the new Tariff sub-heading 738.90, so long as there was no specific mention of structurals in this Tariff itself for the purpose of excisability.
2. The learned Counsel for the respondent/assessee appearing in this appeal, which is preferred by the Revenue, filed a note on 17.07.2006 and requested us that the appeal may be disposed of by taking into account the respondent's written note and that the respondent/assessee did not want to be personally heard. Along with this note, the learned Counsel had placed on record written submissions, with our permission, stating that the matter may be decided on the basis of the written submissions.
3. Admittedly, the respondent/assessee, had filed a Classification List classifying the subject items manufactured by them under Heading 7308.90 and paid Central Excise Duty thereon amounting to Rs. 8,12,494.98 under protest. Thereafter, on 24.11.1989, the respondent/assessee claimed refund of the said amount of duty. That application was rejected by the order-in-original dated 29.06.1990 which was set aside by the Collector (Appeals), as aforesaid.
4. The respondent/assessee has paid Central Excise Duty under protest during the period from 30.04.1989 to 09.05.1989 on the fabrication of structures at site, such as, columns, beams, bracings, bins and supporting structures, smock stack and tanks. The refund was claimed on the footing that these fabrications at plant site did not amount to manufacture and that these fabricated structures were not marketable. A show cause notice was issued on 29.12.1989 to the respondent/assessee stating, as to why the refund of said amount of Central Excise Duty claimed by them should not be rejected. It was alleged in the show cause notice, that the fabricated structural items under reference were clearly identifiable as excisable goods which were capable of being bought and sold, and hence the duty was lawfully paid on such items.
5. The respondent/assessee vide letter dated 03.03.1990 replied to the said show cause notice dated 29.12.1989 and contended that the fabricated structures at site did not result into manufacture of a product saleable in the market and that these items were not ordinarily bought and sold in the market.
6. The adjudicating authority, taking into consideration the contention of the respondent/assessee that there was no manufacturing activity in fabrication of structurals; that they were not marketable; and that the goods manufactured at site resulting in permanent structures attached to the earth did not attract any duty, came to the following findings:
Further, even otherwise though beams, columns, bracings, bins etc. have been subsequently fixed to the earth, but before being installed, they have acquired the character of structurals, namely, columns, beams etc. classifiable under heading 73.08. It is a well-settled principle of law that removal in the context of Central Excise is a broad-based term and it includes removal from place of manufacture as well. Thus, the goods namely the structurals have been manufactured first and have been removed from place of manufacture to be installed/fitted to ground in conjuction with others to give rise to a furnace or captive power plant and their supporting systems, as the case may be. The Department has neither asked nor the party has paid duty on such furnaces or the power plants, which have come into existence after the structurals have been installed/fitted and attached to the ground. Thus, to say that goods have been attached to the earth, hence not dutiable is not correct.
As regards the marketability, I am not able to accept the contentions of the party that the goods are not ordinarily sold in the market, hence not marketable. Thus criteria for marketability is not whether they are ordinarily sold or not, but whether they are capable of being sold. If a product is capable of being sold in the market, then it is marketable. Whether it is actually sold or not is irrelevant. These goods do have a market, may be the goods of specific designs and the requirements as required by the Unit, may not be readily available. Had the goods available readily in the market, the unit would have either bought it or manufactured it depending upon the make or buy decision, based on maximum benefit, Trusses, pre-fabricated columns, beams etc. are also available in the market for sale. So, to say in general that all fabricated items are not marketable is not true. The goods are in fact marketable being capable of being sold.
Thus, I find that the fabricated structural items being clearly identifiable as excisable goods and are classifiable under 7308.90 attracting duty @ 15% Basic and Special Excise Duty at the rate of 5% of Basic duty which have been paid correctly as per the approved Classification List. So the question of any refund does not arise.
7. The learned authorized representative for the appellant/Revenue submitted that, the issues involved in this appeal are directly covered by the decision of the Larger Bench in Mahindra & Mahindra Ltd. v. CCE , and that it was not open for this Division Bench to take a different view of the matter. She drew our attention to the relevant record and the said decision of the Larger Bench of this Tribunal to point out that the three issues raised before the adjudicating authority by the respondent/assessee were all squarely covered by the judgment of the Larger Bench answering the questions referred to it by holding that, the immovable iron & steel structures, not being goods, will not fall under Heading 73.08 of the Central Excise Tariff; that the structures or parts thereof mentioned in Heading 73.08 in their movable state will be subject to excise duty under Heading 73.08 notwithstanding their getting permanently fixed in the structures; and that the plates, rods, angles etc. and the like prepared for use in structures of the types covered under Heading 73.08 will also be excisable goods subject to duty in their pre-assembled or disassembled state.
8. The learned authorized representative for the appellant/Revenue further submitted that, the adjudicating authority had given cogent reasons for rejecting the refund application and the Collector (Appeals) was not justified in setting aside the order of the original authority.
9. In the written submissions, it has been contended by the respondent/assessee that the decision of the Larger Bench was distinguishable from the facts and circumstances of the case in hand and did not apply to the present appeal. It is further contended that, the Larger Bench did not answer the referred question, as to whether the said activities amounted to manufacture and had addressed the issue of excisability which was never referred to. It is also contended that the referral Bench ought to have restricted its answer to the specific question. It is further contended that the question, as to whether the question of cutting, drilling, bending, straightening, welding of plates, rods, angles, channels, with a view to form a part of structurals, amount to manufacture, had since been settled by the Hon'ble Supreme Court and various High Courts in the decisions referred to in paragraph 7.3 of the written submissions.
10. We have heard the learned authorized representative for the appellant/Revenue at length and gone through the written submissions. In our opinion, the issues which are involved in the present appeal and which were succinctly pointed out in the order-in-original, are squarely covered by the decision of the Larger Bench while answering the questions referred to it. It would be a trite thing to say that the entire reasoning contained in the judgment of the Larger Bench, for its findings given thereunder, would constitute the basis of its answer to the question referred to and the answer to the question referred is required to be read in the light of such reasoning and findings. It is incorrect on the part of the respondent/assessee to state, that the question of excisability was never referred to the Larger Bench or that the Larger Bench did not answer the question, whether the activity amounted to manufacture. The question, referred to the Larger Bench, is reproduced hereunder:
Whether:
(a) making of structures and parts of structures of the types illustrated in the parenthesis of Heading 73.08 of iron or steel,
(b) making of plates, rods, angles, shapes, sections, tubes and the like, as articles prepared for use in structures of iron or steel, would amount to manufacture of excisable goods classifiable under Heading 73.08.
The question was clearly on the issue, as to whether the activity mentioned thereunder of making of the articles would amount to manufacture of excisable goods. Therefore, both the aspects of 'manufacture' and 'excisability' were covered under the question referred to.
11. The contentions raised before the Larger Bench were of identical nature. It was contended on behalf of the respondent/assessee that, conversion of parts like angles, shapes, sections etc. into structures, when it emerges as an immovable property, did not satisfy the test of marketability, because they became part of the immovable structure. The decision in Aruna industries v. Collector of Central Excise, (supra) and other cases were cited and the test of marketability was pointed out. It was also submitted that process of cutting, drilling holes etc. did not amount to manufacture. (See paragraph 7 of that judgment).
11.1 In paragraph 9.1 of the judgment, the Larger Bench observed that, lengthy arguments were advanced on the footing as if excise duty was being charged on mere angles, rods, sections, tubes etc. which were raw material. However, on scrutiny of the show cause notices and other records, it was clear that, all these cases were on the question of evasion of excise duty that became payable on the structures, parts of structures when they were fabricated and used thereafter for erecting the designed structure. The Larger Bench observed that:
9.1... It is only for the purpose of valuation of the parts of structures used in erecting the designed structure, that the quantities of raw material such as angles, rods, tubes, plates, etc. used for the purpose and their value were considered for working out the duty evasion. The entire exercise of projecting the matter as if mere angles, rods, tubes or plates that went into the making of the designed structures, were being subjected to excise duty is misconceived and misleading.
11.2 It was held that, "To say that no parts of the structures came into existence as distinct commodities because ultimately they got permanently fixed into an immovable structure will run counter to the legislative intent to impose excise duty on such excisable goods at a stage when they have a separate identity as marketable goods anterior to their being permanently fixed in the immovable structure." The Larger Bench observed that, mere drilling holes or cutting jobs in isolation may not by themself involve manufacture of an article, but, converting raw material like angles, tubes, plates etc. to bring about a distinct commodity will surely amount to manufacture as it is not "mere" drilling holes or cutting, but the activity is aimed at bringing about a distinct commodity. It was also observed that, Truss prices were listed on the websites for various spans of trusses with delivery information, by those dealing in building supplies. Purlins were articles distinct from raw angles and C and Z types of purlins were well known in the field of structural engineering manufactured as marketable commodity. It is further observed that, ratio of the decision in Aruna Industries, supra, and all other decisions which had followed it, was to be viewed in the background of the exemption notification issued in respect of goods manufactured otherwise than in a "factory" as defined in Section 2(m) of the Factories Act and the Tariff Item 68 of the First Schedule which was omitted. It was held in paragraph 12 that, all the parts of structures which were fabricated, were distinct marketable commodities, the existence of which was brought about by the process of manufacture as defined istate.,in Section 2(f) of the Act. These were not simply members, such as, angles etc. with holes or cut to a different size, but the process was undertaken to bring them into a particular commercially known shapes and assemble them for that purpose as per the designs and having fabricated them, to use them for permanently fixing them in the structures which were to be erected as per the design under the works contracts. It was further held that, the work of fabricating parts of structures, such as, trusses etc., referred to in the judgment, was a regular feature in the field of construction of sheds and other structures in which such parts of structures can be used. When such parts of structures were required to be used in the structure which was to be erected for which they were prepared, the person ordering the raising of such structure, provided an adequate market for such goods, in the opinion of the Larger Bench. It was then held that, the customers who placed the order for fabrication of such parts of structure to be raised by entrusting the contract to the manufacturer of such structurals or by itself engaging workers on job basis to get them manufactured, provided adequate marketability to the movable structures and parts of structures falling under Heading 73.08 which remain excisable goods until they are permanently fixed to become part of some immovable structure. The Larger Bench opined in para 13 of the judgment that all these items falling under Heading 73.08 were marketable commodities. The following answer given by the Larger Bench to the aforesaid question referred to has to be read in the light of the reasoning and findings contained in the judgment:
15. For the foregoing reasons, we are unable to accept any of the contentions raised on behalf of the appellants and we answer the question referred to us as under:
(i) The immovable iron and steel structures not being goods will not fall under Heading 73.08 of the Excise Tariff.
(ii) The structures or parts thereof mentioned in the parenthesis of Heading 73.08 illustrating parts of structures namely, bridges and bridges-sections, lock-gates, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, shutters, balustrades, pillars and columns as well as parts of structures such as, trusses, purlins, columns, beams, rafters, glazing frames, crane girders, hoppers, bracings, gable runners, platforms, hand-rails, grating rails, walk-ways, stairs, gutters supports, ladders, gantries, railings, portals, pushings, round surged, inserts, drop-boxes, windties, framework partitions, north light glazing, sliding frames and the like articles in their movable state will be subject to excise duty under Heading 73.08, notwithstanding their getting permanently fixed in the structures.
(iii) The plates, rods, angles, shapes, sections, tubes, and the like prepared for use in structures of the types covered under the Heading 73.08, as aforesaid, will also be excisable goods subject to duty in their pre-assembled or disassembled state., (emphasis supplied)
12. On going through the judgment in its entirety, and particularly paragraphs 9 to 14 thereof, it is clear that the issues raised by the respondent/assessee have been squarely answered against them. The decision of the Larger bench squarely holds that the structurals or part thereof mentioned in the parenthesis as well as parts of structures, such as, trusses, purlins columns, beams, etc. and the like articles in their movable state will be subject to excise duty under Heading 73.08. notwithstanding their being permanently fixed in the structures, and that the plates, rods, angles etc. covered under Heading 73.08 will also be excisable goods subject to duty in their pre-assembled or disassembled state. These answers are given for the reasons mentioned in the judgment, as stated in the opening part of the answers to the questions contained in paragraph 15 of the judgment. Therefore, both, the manufacture aspect and the excisability aspect, have been answered by the Larger Bench and which go against the respondent/assessee on the issues which are sought to be raised in the proceeding for claiming refund.
13. For the foregoing reasons, the impugned order of the Collector (Appeals) cannot be sustained and is hereby set aside and the order-in-original dated 29.06.1990 of the Asstt. Collector of Central Excise & Customs, Cuttack, rejecting the respondent's claim for refund, stands restored. The appeal is accordingly allowed.
(Dictated & pronounced in the open court)